Meanings of Retention Periods Part I

Meanings of Retention Periods Part I

In business life, important documents such as accounting receipts and invoices must be archived. They have to be kept for certain periods of time as they serve as evidence. The retention periods vary depending on the type of documents. They are regulated by law. If they are not adhered to, a company can be punished with fines. There are also retention periods for private individuals for various documents, such as invoices and bank statements. In the case of private individuals, non-compliance with the retention periods can also be punished with a fine. In order to find the documents quickly, business documents, invoices and accounting documents should be archived in an orderly manner.

What are retention periods?

According to PHONEJUST.COM, retention periods are the periods of time for which you have to keep documents that are subject to retention. It can be a document for a completed business process, but also for an ongoing business process. Your retention period begins at the end of the calendar year in which the receipt was created. Retention periods must be adhered to, since completed business transactions could be significant again later. This can be the case if a limitation period has not yet expired and a forfeiture has not yet occurred.

Warranty periods and product liability periods, which require longer retention periods for business documents, apply to various business transactions. Destroying the receipts would result in a lack of evidence that would be detrimental to your company. It is also important to keep your documents (invoices, accounting receipts) in the event of legal disputes and tax audits , as they serve as evidence. Processes that can no longer be remembered can be derived from these stored documents.

Retention periods are set out in commercial and tax law. In addition, industry- and application-specific retention periods for documents apply. They primarily apply to

  • public administration
  • hospitals
  • quality assurance
  • food and pharmaceutical production
  • pharmaceutical research
  • power generation
  • construction
  • telecommunications
  • environmental Protection

Who has to adhere to the retention periods?

Every company, every organization and even private individuals have to fulfill retention obligations that relate to different obligations to provide evidence. These are defined for traders according to tax and commercial law. In § 147a AO (tax code) it is stipulated that all taxpayers who have achieved a turnover of more than 600,000 euros in a calendar year must keep their documents for 6 years.

Statutory retention requirements

Commercial retention obligation according to HGB

According to the Commercial Code , every merchant is obliged to store documents within specified periods. These documents (invoices, accounting receipts, business documents) must be kept for documentation and preservation of evidence and presented in the event of audits and legal disputes. Since the statutory retention periods guarantee the submission of the bookkeeping, they must be observed by all those who are obliged to keep books.

They apply to merchants and everyone who is obliged to keep accounts under the tax code. Private individuals are not required to keep accounts, but in some cases retention periods apply to them as well. The data must remain legible for the entire duration of the retention period. The law stipulates which documents must be kept and which retention periods apply to the respective documents. The commercial code, but also the tax code regulate the statutory retention requirement, some of these regulations are congruent. In Germany, retention periods of two years, six years, ten years and unlimited retention periods apply.

Example:

According to § 257 (1) HGB, as a businessman, you have to keep your trading books, balance sheets, annual financial statements and individual financial statements for 10 years. In addition, there are your commercial letters (copies of the sent ones) and the accounting receipts for the books that are to be kept in accordance with Section 238 (1) HGB .

Tax retention obligation according to AO

According to tax law, more precisely according to § 147 (1) AO, you are obliged to keep the following documents “orderly”:

  • all your books and records, inventories, annual financial statements, management reports, the opening balance sheet, but also all work instructions and other organizational documents necessary for understanding the balance sheet
  • all commercial and business letters received
  • the copies of the commercial or business letters you have sent
  • all accounting documents
  • “All necessary documents” according to Article 15 paragraph 1 and Article 163 of the Union Customs Code
  • and all other documents insofar as they are of importance for taxation

Retention periods for business documents

As a rule of thumb, you can use the fact that you must keep every document that you use for your accounting for ten years. (At most, small businesses or self-employed people who have no employees can deviate from this). Most other documents have a 6-year deadline. We discuss shorter and unlimited deadlines in the separate sections below. For this it is of course important when the deadlines start and end. We will explain this to you later in a separate section.

Retention Periods 1

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